After the war in Iraq, the US seems determined to increase its influence in the Gulf region. How fare it can go experienced Japan which came under US pressure not to conclude a $2 billion deal to develop a section of Iran's giant Azadegan oil field.
After the war in Iraq, the US seems determined to increase its influence in the Gulf region. How fare it can go experienced Japan which came under US pressure not to conclude a $2 billion deal to develop a section of Iran's giant Azadegan oil field. The field is expected to hold recoverable reserves of some 6 billion barrels. It is a key project for Iran as the country tries hard attracting foreign investments for its oil and gas industry. According to the US, the deal should not be signed until Iran allows international inspectors access to its nuclear facilities and stops supporting the Lebanese Hezbollah movement, which the US classified as terrorist group. According to Washington it would be very unfortunate if such a huge oil and gas deal would be signed at a moment, Iran is stepping up efforts to further its nuclear programme.
It seems that the US has been successful in putting Japan off. Officially, negotiations with Iran are continuing but a government reshuffle in Japan makes deal unlikely. One of main backer of a Japanese involvement in Iran, the former Minister of Energy, Trade and Industry, Tekeo Hiranuma was replaced by Shoichi Nakagawa, who is said to prefer the energy cooperation and closer economic ties with Russia.
But on Monday, Iran overcame the stalled negotiation process and oil officials of the country announced that it aims at awarding a contract to develop Azadegan in the second or the third quarter of next year. Iran invited companies from France, the Netherlands, Norway, China and India to bid for a development of the structure. China seems to be at the forefront as it is less dependent on the US than Japan. The country has been very eager to diversify its resources of energy supplies. In recent years, diplomatic relations between China and Iran have been improving. One of the last trips the Chinese ex-prime minister, Jiang Zemin, undertook was a visit to Teheran where he pledged for stronger Sino-Iranian relations. Chinese National Oil Company (CNPC) has been working in Iran for years and would be likely to take the opportunity to participate in such a huge upstream project. Sinopec, another Chinese oil major, has also Iran experience as it helped to construct storage facilities at the Caspian port of Neka, and to upgrade the Tehran and Tabriz refineries. These contracts have not attracted much attention in Washington some years ago but the attitude towards Iran has changed. There remains the question if China?s new Prime Minster, Hu Jintao, wants to risk US-Chinese relationships.
Although Russian companies were not officially announced to have been invited, Gazprom, the Russian gas monopoly still seems a candidate for the development of Azadegan. It was a partner of Total and Petronas in a $2 billion project in Phase 2 and 3 of the south Pars gas development. Gazprom is not the only Russian company, active in Iran. Tatneft hopes soon to sign a contract for the exploration of the Morgan field which is expected to hold 700 million bbl of reserves.
The size and complexity of the project are enormous and it is therefore optimistic to expect that a new deal can be negotiated until summer 2004. Until then, NIOC, the Iranian state-owned oil and gas company might start developing part of the field itself. It might concentrate on reservoir where it has the expertise for the development and leave the more complicated projects to international majors. It is expected that production can rise up to 700?000 barrels per day. The field is crucial to Iran?s long-term plans to boost crude production from the current 3.9 million barrels per day to up to 5 million barrels per day within the next 10 years.